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Monday, February 25, 2008

The evolution of MVNOs

I moderated an interesting panel debate session while I was in Barcelona, on behalf of billing vendor Highdeal. It was titled "What do MVNOs want to be when they grow up?" and it featured speakers including representatives of

  • Highdeal
  • Carrefour (a French retailer operating MVNOs in 5 European countries)
  • SAP (which offers business support capabilities like payment collection)
  • Experian (which offers MVNE services)
  • Index Europe (which offers hosted web portals for MVNOs)

The session was quite lengthy, so I'm not going to review all of it here, but a couple of points really jumped out at me:

  • The easy times for MVNOs finding niches are swiftly passing. It's taken them a while, but competition has forced the incumbent operators to tighten their game in segmentation. Successful MVNOs will probably have to evolve their offerings continually, to avoid being copied by rivals with broader market visibility.
  • The increasing popularity of owning multiple handsets works in MVNOs' favour. They don't need to substitute outright for a given customer's entire existing mobile experience - instead, they can lower entry/switching barriers by targetting certain use cases via a second phone & SIM. Then, over time, they can look to supplant an increasing proportion of the user's total activity & spend.
  • Distribution really matters. The speaker from Carrefour pointed out that a very sizeable % of the French population walks through his stores on a regular basis. Conversely, a number of high profile MVNO failures have been attributable to a lack of retail presence. Clearly, this impact those MVNOs that bundle handsets rather more than those that rely on "SIM only" deals sent by mail.
  • Following on from this, the handset issue remains a headache. Availability of unlocked phones varies widely by country, and even where they are available, they are often difficult to use for advanced features other than voice & SMS. (Blyk uses MMS to deliver its adverts... sorry, "brand messages"). On the other hand, customising phones is a horribly expensive exercise, as Helio has found out in the US.
  • There was quite a lot of discussion about low-cost airlines' business models in comparison with MVNOs'. One particularly good observation was about Ryanair, which although provides a very cheap underlying product (airfares), then loads up with 100 extra revenue streams, like snacks and drinks on the plane, insurance, hold baggage, and now even airport check-in. I keep expecting to have to pay extra for a seatbelt or using the toilet when I fly with them. In an MVNO context, the parallels are with content, advertising or other sources of business. (Of course, most mobile operators have also long taken the same view of "customer service" as the airline's famously abrasive CEO, Michael O'Leary).
  • The need for flexibility in terms of billing and back-office systems came up several times (unsurprisingly given the event's sponsor) but it is something that I certainly agree with. There is still significant mileage in constructing innovative pricing schemes that appeal to think slices of the mobile population, as well as the need to adjust and amend these with a broad range of parameters. In addition, given the lack of certainty about exactly which of the future revenue streams may prove popular (or how to package/bundle them) retaining the maximum set of choices rather than "hard wiring" billing options makes sense.
  • There was an interesting question about the use of NFC chips in conjunction with retailers' MVNOs (or possibly bands), for applications like loyalty cards, payments and so forth. I'm pretty skeptical about NFC as a massmarket mobile proposition (although I don't write it off entirely), but I can see it making limited sense in some circumstances.

One area I couldn't really drill into was around data and corporate-focused MVNOs, which is where I think some significant innovation is occurring at the moment. But as I noted last week I'm seeing a definite increase of interest around dual-mode devices, unified communications and systems integration. To me, this is among the best ways in which MVNOs can differentiate sustainably. I'll cover "advanced MVNOs" in future posts.

Lastly, and also more food for thought, was some discussion around the concept of how 'mobile virtuality' plays out as more of the overall telecoms industry moves towards some messy combinations of outsourcing, bundling, multi-play and managed services. Arguably, the classical view of MVNOs as a simple wholesale/retail proposition starts to look a bit monochrome in the face of the quadplay, web services, network-sharing and new entrants like Nokia Ovi. Again, worth another look in more detail at another point.

1 comment:

Anonymous said...

Customizing a phone, even with all the advanced stuff somebody like Helio is doing, does not cost more than running an ad once a day every day in prime time for a month on MTV. Custom-building a phone is a different matter but even that can be done pretty cheaply with Chinese or Tier 2 Korean OEMs. Distribution without native (i.e. owned) venues is really expensive.